REG - Gresham House Energy - Quarterly NAV announcement and business update

Gresham House Energy Storage FundAnnouncement

18/11/2024 07:00

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RNS Number : 5083M  Gresham House Energy Storage Fund  18 November 2024

18 November 2024

Gresham House Energy Storage Fund PLC

("GRID" or the "Company")

 

Quarterly NAV announcement and business update

 

Gresham House Energy Storage Fund plc (LSE: GRID), the UK's largest fund
investing in utility-scale battery energy storage systems (BESS) reports its
latest NAV. As of 30 September 2024, NAV was £620.8mn and NAV per share was
109.09p per ordinary share, down 0.1%.

 

Highlights as of 30 September 2024

·    NAV per share was 109.09p, down 0.1% in the quarter (30 June 2024:
109.16p).

·    Operational capacity was 790MW / 1,031MWh on 30 September vs 790MW /
931MWh of 30 June 2024 and has subsequently increased to 845MW / 1,207MWh.

·    260MW of capacity is being operated under tolling agreements.

·    During the quarter, the most significant changes to NAV per share
included:

o  -2.21p from updated Q3 third-party revenue curves

o  +1.91 impact from the valuation model rolling forward by three months

o  +0.53p from lower insurance costs across the portfolio reflecting lower
replacement costs and reduced premiums

o  -0.40p from later commissioning of remaining projects under construction

o  +0.32p from changes in working capital, fund costs, and debt costs

o  -0.23p from movements in the fair value of the interest rate swap.

·    No changes to inflation assumptions or underlying discount rates were
made during the period.

·    Weighted average discount rate (WADR) is 10.8% for the full portfolio
including projects under construction and 10.6% for the operational portfolio.

·    Operational assets are valued at an average of £661k/MW. Discounted
cashflows represented £651k/MW of the total while working capital represented
the remainder.

·    The NAV does not include potential upside expected to be realised by
increasing durations of further operational projects, beyond those already in
train, as financing has not yet been secured.

·    The underlying portfolio generated revenues of £11.7mn and EBITDA of
£7.2mn in Q3 2024.

·    Total debt drawn at the end of the period was £140mn; the total
facility size was reduced to £195mn from £225mn.

·    Cash on hand between the Company and its investments was £33.2mn as
of 30 September 2024.

 

 

Portfolio earnings update

 

The underlying portfolio generated revenues of £11.7mn resulting in
underlying portfolio EBITDA of £7.2mn in Q3 2024, a like-for-like improvement
in underlying portfolio EBITDA quarterly run rate of 38% compared with H1
2024.

 

Portfolio revenue rates improved to £59k/MW/yr compared with £49k/MW/yr in
the first half of the year. Revenues through the year have been further
bolstered by the increasing capacity as operational capacity increased from
690MW at 31 December 2023 to 790MW at the end of September 2024. On an
annualised portfolio revenues basis this has increased from £35.8mn in H1
2024 to £46.6mn in Q3 2024.

 

The portfolio continues to outperform the Modo BESS index, achieving on
average 26% higher revenue figures across the quarter. This trajectory has
continued in October with the portfolio achieving £71k/MW compared to the
Index value of £57k/MW/yr, representing the best individual month of the year
so far for the Company's portfolio.

 

October revenues improved on the back of increased tightness (reduced excess
supply) on the system. With the last coal fired generation finally
decommissioned earlier this year, which had created significant excess supply
over the previous winter suppressing revenues further, we are now starting to
see a return of scarcity pricing on days of low renewable generation. This was
highlighted by the first Capacity Market notice to be released in almost two
years on 14 October 2024. As with previous notices, this was later cancelled
once additional more expensive generation was brought online but did lead to
significantly higher peak electricity prices. Merchant revenues are likely to
remain volatile while NESO undertakes improvements in the Balancing Mechanism,
and it is encouraging to see volatility of supply begin to translate to
volatility in system prices and hence improved trading spreads.

 

 

Construction and pipeline update

Enderby and West Didsbury duration augmentations were completed in July 2024
adding a total of 100MWh of operational capacity and taking both to 50MW /
100MWh. Each project was completed within three months and demonstrated the
significant value in prioritising investing into the existing portfolio ahead
of new projects.

 

These augmentations were the only additional capacity added in the quarter but
since the period end the Company extended its operational capacity by 55MW /
176MWh through the addition of:

·    Elland (50MW / 100MWh), a new project near Leeds, energised on 1
November 2024 and expected to be fully revenue generating by the end of the
month.

·    Penwortham B (50MWh added), an augmentation to the original
Penwortham site, energised on 30 October taking its capacity to 50MW / 100MWh
and is earning at full capacity.

·    Nevendon B (5MW/26MWh added), an augmentation to the original
Nevendon site, energised on 23 October taking its capacity to 15MW / 33MWh,
and is at full revenue generating capacity.

 

The remaining pipeline is now expected to complete by the end of Q1 2025 with
a delay in the connection on West Bradford and to the start of the Coupar
Angus augmentation, pushing its completion back by a quarter. Updates on the
remaining pipeline are given below:

·    Melksham (100MW / 200MWh) is under 'rules', i.e. has been taken over
by the DNO to complete the energisation which is expected on 22 November 2024.
The site will initially be commissioned at 100MW / 100MWh, with the
augmentation to 200MWh expected to follow shortly after by the end of January
2025.

·    West Bradford (87MW / 174MWh) has experienced some delays.
Commissioning is now expected in Q1 2025. The Manager will update the market
with a more precise date in due course.

·    Coupar Angus's augmentation to 2-hours (+40MWh) is underway but due
to delays in the planning permission and the need to observe a judicial review
period, commissioning is now expected in Q1 2025 having delayed the start of
construction. The site remains operational in the meantime and is under a
tolling agreement.

 

Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc &
Managing Director of Gresham House New Energy, said:

 

"It is pleasing to see that while revenues in GB are improving across the
market, we are maintaining our outperformance versus the competition whilst
delivering a more diversified GB revenue profile. This underlying revenue
performance, combined with the increased operational capacity under
management, means that the Company remains on track to outperform 2023
revenues this year.

 

We are also set to have energised ten new projects and augmentations and to
have nearly doubled the operational capacity of the portfolio through 2024,
taking operational capacity to 1,387MWh by the year end. This will increase
further to 1,701MWh shortly after the year end with the conclusion of our
current in construction pipeline. The increased operational capacity moving
into 2025 gives us a much stronger footing for earnings generation to support
our objectives.

 

As we reach the end of the current construction pipeline, we can now start to
turn our focus to the future and our three-year plan which we look forward to
updating on at the Capital Markets Day."

 

Capital Markets Day update

 

Fund Manager, Ben Guest will set out the framework for the Company's
three-year plan through 2027, including indicative targets for MW and MWh
capacity, revenues, and EBITDA at the Capital Markets Day on Wednesday 27
November, 2.00-4.00pm (GMT). Please register to attend here
(https://greshamhouse.connectid.cloud/register) .

 

Q3 2024 factsheet

The factsheet for the period ended 30 September March 2024 is available within
the key documents section of the website
at https://greshamhouse.com/real-assets/new-energy/gresham-house-energy-storage-fund-plc/
(https://greshamhouse.com/real-assets/new-energy/gresham-house-energy-storage-fund-plc/)
.

 

LEI: 213800MSJXKH25C23D82

 

For further information, please contact:

 

 Gresham House New Energy                +44 (0)20 3837 6270

 Ben Guest

 James Bustin

 Harry Hutchinson

 Jefferies International Limited         +44 (0)20 7029 8000

 Stuart Klein

 Gaudi Le Roux

 Harry Randall

 KL Communications                       gh@kl-communications.com (mailto:gh@kl-communications.com)

 Charles Gorman                          +44 (0)20 3882 6644

 Charlotte Francis

 Effie Aye-Maung-Hider

                                         GHEnergyStorageCoSec@jtcgroup.com (mailto:GHEnergyStorageCoSec@jtcgroup.com)

                                       +44 (0)20 7409 0181
 JTC (UK) Limited as Company Secretary

 Christopher Gibbons

 

About the Company and the Manager:

 

Gresham House Energy Storage Fund plc seeks to provide investors with an
attractive and sustainable dividend over the long term by investing in a
diversified portfolio of utility-scale battery energy storage systems (known
as BESS) located in Great Britain and internationally. In addition, the
Company seeks to provide investors with the prospect of capital growth through
the re-investment of net cash generated in excess of the target dividend in
accordance with the Company's investment policy.

 

The Company targets an unlevered Net Asset Value total return of 8% per annum
and a levered Net Asset Value total return of 15% per annum, in each case
calculated net of the Company's costs and expenses.

 

Gresham House Asset Management is the FCA authorised operating business of
Gresham House Ltd, a specialist alternative asset manager. Gresham House is
committed to operating responsibly and sustainably, taking the long view in
delivering sustainable investment solutions.

 

http://www.greshamhouse.com/ (http://www.greshamhouse.com/)

 

 

Definition of utility-scale battery energy storage systems (BESS)

 

Utility-scale battery energy storage systems (BESS) are the enabling
infrastructure that will support the continued growth of renewable energy
sources such as wind and solar, essential to the UK's stated target to reduce
carbon emissions. They store excess energy generated by renewable energy
sources and then release that stored energy back into the grid during peak
hours when there is increased demand.

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